By Shadia Nasralla LONDON, Feb 4 (Reuters) - Oil prices rose on Wednesday after the U.S. shot down an Iranian drone and armed Iranian boats approached a U.S.-flagged vessel, rekindling fears of an escalation between Washington and Tehran ahead of planned talks.

Crucial talks between the US and Iran appear set to be held in Oman as Tehran seeks to ensure the scope of its negotiations with the Trump administration is limited solely to its nuclear programme.

A U.S. Navy fighter jet shot down an Iranian drone that was approaching the aircraft carrier USS Abraham Lincoln in the Arabian Sea, U.S. Central Command said Tuesday, threatening to ramp up tensions as the Trump administration warns of possible military action to get Iran to the negotiating table.

Futures tracking Canada's main stock index rose on Wednesday as precious metals extended their gains, while oil prices climbed amid simmering tensions in the Middle East after the U.S. shot down an Iranian drone.

The oil market got another boost from a bullish inventory report from the American Petroleum Institute (API). The numbers show that US crude oil inventories fell by 11.1m barrels over the last week, significantly larger than the roughly 640k barrel draw the market was expecting.

Iran's president said Tuesday he instructed the country’s foreign minister to “pursue fair and equitable negotiations” with the United States, the first clear sign from Tehran it wants to try to negotiate as tensions remain high with Washington after the Mideast country's bloody crackdown on nationwide protests last month.

Iranian MP Mojtaba Zarei urged Jordanians to seize the Muwaffaq Salti Air Base and take US soldiers captive after Tehran strikes the base in a threatened upcoming ballistic missile attack.

In a series of posts on X on Sunday, Iran's Supreme Leader Ayatollah Khamenei said, “The Americans should know if they start a war, this time it will be a regional war.” US President Donald Trump reacted to his comments.